Jo Cumbo is no longer the FT’s pension correspondent – she’s a roving force for challenge but that doesn’t stop her coming back to old grounds to have her say. She has found TPR’s recently published Corporate Plan to be worth a tirade on Twitter and we can thank her for it on a wet Saturday morning
Another development today in the UK Govt’s efforts to pressure pension funds to support the UK economy. They have set the UK pensions regulator a new performance indicator around how well it supports UK growth. This is problematic for savers for several reasons. 1/ https://t.co/qUxVv7V3kO
— Josephine Cumbo (@JosephineCumbo) July 17, 2025
This new growth KPI aligns the Pension Regulator with Treasury’s growth goals, in a measurable way. HMT wants more of the trillions held in pension funds to be invested in areas like UK infrastructure, and start up businesses. Effectively your retirement money to fuel growth. 3/
— Josephine Cumbo (@JosephineCumbo) July 17, 2025
This development shows further signs of blurring fiduciary duty (to members) with national economic policy. The real test will be whether trustees and investment committees can resist indirect pressure to prioritise “productive investment” unless it genuinely benefits members.5/
— Josephine Cumbo (@JosephineCumbo) July 17, 2025
If you are in a workplace pension, now would be a good time to keep a check on your pot.
Your retirement outcomes depend directly on:
– where your money is invested
– the performance and cost of those investments
– risk profile of your investmentsBest advice? Be engaged. 7/7
— Josephine Cumbo (@JosephineCumbo) July 17, 2025
It occurs to me that the most efficient way The Pension Regulator could promote growth in the British Economy is to reduce the pension provision costs of employers.
It should do this by encouraging employers to provide pension benefits through arrangements that provide enhanced value for money for contributions paid namely whole life pooled risk schemes – such as Defined or Targeted (CDC) Benefit arrangements.
The poor growth experience of the UK economy, relative to its international peers, can be attributed in no small part to the excessive and unjustified deficit recovery contributions paid by UK employers! (How many company failures can be directly attributed to the Pensions Act 2004?) This has been compounded by the excessive premiums paid to transfer risk from the (productive) employers to the insurance sector?
Secondly, and already within TPR’s control, they should seek to reduce the obscenely excessive administration costs associated with the administration and investment of the pension funds. These costs are at least clearly identified in a DB pension scheme, whether borne by the employer or out of scheme assets, but in a DC arrangements they are largely hidden in reduced investment returns. We now have DC pension providers seeking to increase the disclosed Annual Management Charge so that they can report improved investment returns.
“HMT wants more of the trillions held in pension funds to be invested in areas like UK infrastructure, and start up businesses. Effectively your retirement money to fuel growth.”
This seems to mean that HMT wants pensioners and those saving in pensions to fund their retirement to take on more risk.
But does this fit with either their risk appetite or their capacity for loss. If a financial adviser deliberately put a client’s assets into risky assets, without assessing how it fits with their risk appetite or capacity for loss, the Regulator would be after them for mis-selling. Why is it OK for the government to try to strong-arm pension funds to do exactly the same thing?
While the inclusion of scheme investments in private assets may make sense from the perspective of HMT’s objective of increasing investment in ‘productive growth’ – it is possible that more of these funds will pass through to companies and result in increased investment by them than is the case when pension schemes simply buy their public market traded equity or bonds – but this is questionable when the objective is infrastructure investment. The criterion for these projects using private rather than public market finance should be one of relative cost.
There is a parallel and similar change under way in the US with 401k plans being freed to increase private investment (apparently there will be a safe harbour provision introduced to limit the prospect of scheme member litigation) The US trade press offered the following:
“In 2020, many asset managers published views on the reasons why it makes sense
for individual investors to gain access to private markets. … (Private) Asset managers will profit mightily by getting their products into new channels, so their pieces could be seen as self-serving in some circles”
That article began with: “While asset managers are salivating over the idea of tapping in to a portion of the $12.5 trillion in defined contribution assets, … ” which would not augur well for the US pensions savers.
There is no reason, that I can think of, why the UK should be different.